Members couldn’t even make progress on small yet crucial items, such as ending subsidies to fisheries that are endangering the globe’s stock of fish. Of course, no progress was made toward repairing the organization’s critical trade-dispute mechanism, which remains largely inoperative after Washington — frustrated at what it called the WTO’s “judicial activism” — blocked appointments to the appellate body that stood as its final arbiter. The internet barely dodged a bullet at the last minute, when India and South Africa agreed to extend a moratorium on placing tariffs on digital goods for another two years.
If the meeting produced one clear takeaway, it is that unless Washington recovers its commitment to a rules-based trading system, the organization it painstakingly helped build over half a century to police international commerce will prove irrelevant to the new global challenges coming into focus, from the mass deployment of artificial intelligence to climate change.
No decision has ever been easy at the WTO, where change requires consensus. In nearly 30 years up until this week, the organization had managed to conclude one “plurilateral” deal on measures to facilitate trade (which does not cover the entire membership), along with a partial deal on fisheries. The Doha round — its big shot at another broad global agreement — collapsed.
Future progress looks even more unlikely.
Constrained by climate change and seemingly at the cusp of a technological revolution of uncertain but probably far-reaching implications, the world needs a strong WTO to guide this new phase of global economic interaction.
Critical items on the agenda include how to coordinate disparate strategies to build and deploy new energy technologies to combat climate change — which have already sparked tensions between Europe and the United States. The United States also has a huge stake in the development of artificial intelligence, which will require international coordination on the protection of intellectual property, the treatment of data used to train the new systems and privacy concerns. A functioning mechanism to solve disputes over trade is in everybody’s interest.
Instead, rising tension between the United States and China, as well as growing skepticism in Washington over trade’s impact on U.S. workers, has decimated the WTO. Flouting of WTO rules is becoming commonplace. Various countries have complained about the trade-distorting subsidies and domestic content rules in the 2022 Inflation Reduction Act, the Biden administration’s main tool to develop green energy and combat climate change. And now the European Union is following Washington’s lead, setting up its own package of subsidies.
This will not only make the green transition slower and more expensive; it will also cut out developing countries, raising the question of how they will afford their own climate transition. “Rich countries can play the subsidy game,” said Ngozi Okonjo-Iweala, director general of the WTO. “Poorer countries cannot afford it.”
The rules-based trade order could unravel. The long-term cost of the world fragmenting into rival trading blocs, according to the International Monetary Fund, could amount to a massive 7 percent of global economic output. China is already building its own system, cutting regional and bilateral trade deals with nearly 30 countries, accounting for nearly 40 percent of its exports.
The future of the global trading architecture will largely depend on the United States, the main engine of the decades-long process after World War II that led to the creation of the WTO in 1995. The United States has, unfortunately, lost interest. Compelled, in part, by the WTO’s failure to curb China’s illegal tactics to gain global markets, the burst of protectionism that started during Donald Trump’s presidency has survived into the Biden administration, which has championed a new “consensus” that is wary of globalization.
To be sure, the WTO needs reform. It requires a better system to resolve trade disputes, not only to address U.S. concerns but also to make it simpler for smaller countries to use. It needs a more nimble setup, for groups of countries to make progress on areas of common interest, free of the burden of universal consensus. It must address China’s repeated use of nonmarket tactics to tip the playing field in its favor and conquer foreign markets.
But abandoning the WTO would be a grave mistake, leaving the world without a multinational cop to keep countries trading fairly — and the whole world poorer for its absence.
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